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The Growth Stock Investor is a trader/investor who applies a fusion of fundamental, technical, and quantitative strategies for market timing, growth stock selection, and risk management.
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  • Market Analysis December 28, 2010 0 comments
    Dec 28, 2010 9:01 AM | about stocks: IEC
    Market Analysis

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    Market action on the 27th was light volume and more indecision price action. We saw the volume across the board lighter than pre-christmas volume. This is most likely to be expected until the new year with holiday plans and bad weather across the country keeping trading and business down. One very clear thing to note today is that most of the issue went down with most of the volume. The intra-day climb back to unchanged hid that most stock were down on volume. This is why it is important to watch breadth, as true market action can be hidden by price.

    Sector Analysis

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    Again, price and volume are very interesting today. According to our ranking, the sectors with the most price action were actually the weakest. This occurs because the largest stocks make price gains, while the majority decline, giving the sector a positive price increase while in reality, most issues are declining on volume. When there are only a few securities (as in financials) that are holding up the sector, than its strength cannot be trusted.

    As usual, since about two weeks ago, we see more inflation and safety sectors gaining strength as the discretionary / technology play rolls over. This sector rotation should be noticed as it has been occurring for some time now, and is becoming more pronounced.

    Equity Analysis

    One stock that seems to be bucking the weakness is IEC Electronics. The company makes circut boards for various US companies. The reason I like it is because it is a Darvas type stock.

    For those who aren't familiar with Darvas, he was a trader who turned $30,000 into $2,000,000 in just two years. His methodology was a growth stock type of method. I have a special algorithm modeled after my Darvas research that rarely outputs a stock. However, today IEC showed up.

    IEC has high earnings and relative strength. It is breaking out of a very large base and has reason to grow. It's clients are growing in sales, and this is carrying through to IEC's sales.

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    We also see that as the company has cleaned up its costs and covered research expenses that it is not working with some of the highest margins in its history, a historically good sign as mentioned by William O'Neil in his book How To Make Money In Stocks.

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    As can be seen by the chart, there has been an upward slanted base as the MA's have pushed together and slowly risen. This occurred after initial interest by the institutional community back in 2009. With three higher lows over the last year, with a breakout from that pattern at the same time as a breakout from multi-month triangle to New Highs; the technical setup for this stock is very good. There are many other good fundamental and technical attributes to this stock, but you get the idea.

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    Positions: None

    Themes: Market Analysis Stocks: IEC
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